Randomwalktrading review

[tom]

I am a fan of Dan Sheridan, just about all of the mentors out there came through or were affiliated with him at some point, it really is just about all of them. I know some lose interest in him after a while, as he does stick to teaching the same content year after year, maybe it gets a bit boring, but it is a good solid approach.

It is interesting to see how the Boxcar trade evolved over time, I think it probably had its routes with the Space Trip Trade that was discussed in some of the segments back in the 2016/2017 time frame.

Dan's really great at teaching the basics. Back in the 2005-2008 time frame, he was the only one doing options mentoring. Many of us "old heads" were in Dan's community (which I built ). Seth Freudberg and Mark Sebastian were both mentors for Dan for instance. Dan does teach the same materials each year but there are a lot of new options traders that benefit from a good understanding of the basics of options trading. As mentioned, it is a good solid approach.

The Boxcar didn't come from the Space Trip Trade (STT). The STT evolved from the Road Trip Trade. The Boxcar is more an evolution of the Weirdor. Dan Harvey created the Weirdor, Road Trip Trade and the Boxcar trade. The time line would be something like this:

- Weirdor Trade (Amy Meissner did a course on the Weirdor at SMB Training. She called it the Asymmetric Iron Condor...but it's the Weirdor trade)
- Road Trip Trade (RTT)
- Space Trip Trade (STT)
- Boxcar Trade

Dan Harvey has been with me for every Boxcar Trade Weekly Review meeting. (Thanks Dan!). Dan always has interesting insights and we have good discussions each week.

 

[tom]

Just stop for a moment and think how orders are filled. Price is a price, you can wait for price to come to your level or use price at hand. The main thing is not the technique but to know where the price is. I believe Ruble had a presentation about it lately. If you know the price you can make better decision, if you don’t know how to find a price you may use some technique that makes you feel good.

One interesting thing I added to the Boxcar monitoring spreadsheet I built is different ways to calculate the price of a spread. I have three columns:

• Mark to Mark
• Ask to Ask
• Put/Call Parity price comparison

Here are two sample put quotes for 8/19/2022 expiration:


Mark to Mark is what most traders use.
Ask to Ask is what market makers use.
Put/Call Parity looks at the price of the calls in this case to calculate what the put price should be.

In this example, the Mark to Mark price is 0.075 but the other two prices are 0.10. I wouldn't count on getting filled at the Mark to Mark price until it is the same as the Ask to Ask price.

Scott had an example of using the Mark to Mark price with a deep in-the-money call on a stock. The Mark to Mark price was $40 according to the thinkorswim screen shot he showed. However, the stock had $40.62 of intrinsic value and the put was trading for $0.20 so the true value of the call was $40.82. As Scott said, if you put an order to sell that call at the thinkorswim Mark to Mark price of $40, market makers would be fighting each other to fill your order and collect $0.82 of free money.

Here's a link to Scott's presentation on pricing options:

 

[status1]

In this example, the Mark to Mark price is 0.075 but the other two prices are 0.10. I wouldn't count on getting filled at the Mark to Mark price until it is the same as the Ask to Ask price.

That is from the spreadsheet In reality that is rounded up or down to the nearest 5 cents price In this case the 0.075 would be 0.05 in TOS for the 3935/3910 spread (after hours)

Even if the mark to mark is the same as the ask to ask it's still no guarantee that it will be filled and you may have to give up 5 cents or more to get filled unless you wait for the market to come down to meet your price

I am pretty sure the 3935 spread is not going to be filled at 0.10 ask when it is $5 further OTM compared to the 3940 Perhaps another round up in the spreadsheet or from TOS I have seen sometimes when I initialize the prices in the spreadsheet that the mark has 3 decimals so I have to correct the fill prices manually

While I understand Scott's presentation I can't remember a time when I was filled right at the mark price I always have to add 5-10 cents or more
Maybe it has to be deep in the money for that to be effective but most of the time it never fills at the mark

 

[srk]

That is from the spreadsheet In reality that is rounded up or down to the nearest 5 cents price In this case the 0.075 would be 0.05 in TOS for the 3935/3910 spread (after hours)

Even if the mark to mark is the same as the ask to ask it's still no guarantee that it will be filled and you may have to give up 5 cents or more to get filled unless you wait for the market to come down to meet your price

I am pretty sure the 3935 spread is not going to be filled at 0.10 ask when it is $5 further OTM compared to the 3940 Perhaps another round up in the spreadsheet or from TOS I have seen sometimes when I initialize the prices in the spreadsheet that the mark has 3 decimals so I have to correct the fill prices manually

While I understand Scott's presentation I can't remember a time when I was filled right at the mark price I always have to add 5-10 cents or more
Maybe it has to be deep in the money for that to be effective but most of the time it never fills at the mark

I agree with this statement about not being able to fill at the mark.

For my butterfly (or iron butterfly) transactions:

The best is the SPX I can fill at the mark maybe 50% of the time, better than the mark around 10% and have to add 5 cents in the other 40 %.

In the RUT it is even worse, i may fill at the mark 25% of the time, better than the mark 5%, and then have to add 5-10 cents the other 70%.

NDX butterflies are an interesting experience, and always stomach churning since the numbers are larger. About 15% of the time it fills better than the mark, 40% of the time at the mark, and 45% of the time worse than the mark (but then it can be 20-40 cents away since NDX is a larger instrument).

Both the RUT and NDX can also be a little longer to fill when I place larger transactions, SPX is very liquid.

For the spreads: it is a little better, but still not equal to the mark

 

[Marcas]

What do you mean by the warning sign, Marcas?

It's bit of personal but also objective warning (imo).
As Tom mentioned Sheridan Options (I can get the name wrong) was one of few, if not the only one, source of info for retailers stepping into options world. It was/is aimed for beginner traders. As such many topics are simplified, sometimes to a very questionable point where, I argue, they teach wrong things.
Without going into details - what is good for kindergarten children is not always the best for kids in university.
John Locke was one of students there. I didn't follow him but heard him occasionally. He extended Sheridan's style a lot but in essence it was the same thing (I'm talking personal impression). Last time I heard him was here on Aeromir and I was surprised how much he changed. It was a Round Table presentation done few years ago (I'm not sure when exactly) - you can look it up for more details. I do not know how his practice has been since but what he told was a huge reverse from Sheridan (and also his own) methods.
Again, "Sheridan methods" are not bad in itself but represent mostly very entry level to option trading (imo, ofc ). Thus the warning.

 

[Tb2018]

I agree with Marcas 100%.Also take note IMHO) They(Most Mentors) are selling you the dream of making money, quitting the day job,live forever on yours saving.....for short they are good at marketing! The problem is they are not TRADING (With few exceptions.......)but they make money "teaching you" how to make money.So ask yourself if a good trader at Goldman ,Morgan Stanley, or any Real Professional trader that is profitable will ever sell a course or share with the general public his/her's style of trading....

 

[Marcas]

I'm not so harsh on gurus anymore

At minimum they do present some ideas to consider, improve and maybe implement. Without exchange of experience lone traders would be in worse position.Gurus can be helpful for new traders to start off. The problem is that some do not try to cut gurus away and depend on on them in most trading decisions. This is only partially due to marketing and other techniques to keep students as long as possible. - after all I wouldn't expect anything else.I even don't think guru has to trade himself. There are so many ways to dress up results, even with publishing execution tickets that it's not a main factor. I'd rater look on long term performance like 3+ years or more.

As an example of good thing that get from educator I use Tom's example. A while ago he was showing RTT. I was skeptical about the trade but Tom was using long call spread with it. Very small thing and he did not discuss it much but it was an eye opening for me - it showed different way of thinking - at least for me.

So, I suppose gurus do have a place in trading community and they are not going anyway (it's a mix: source of income and joy of teaching, imo). Mistake is on student's side not trying to cut the cord (for various reasons, sometimes reasons that make a lot of sense).

I suppose it is similar to the problem I had with normal distribution once. Models do ND but market is not ND - thus, I thought, it is a good idea to ignore ND. Then I learned that ND indeed is quite useful, and is, probably, the best tool we have. The problem was in my thinking. I suppose it was sort of LTCM case you reminded, but in reverse. They trusted their models to death where I, almost, rejected models bc they were not ideal. Now I do use ND as it is quite useful but am ready to ditch model when circumstances arise.

Main point I,m trying to make is that gurus and groups around then do provide some material to ponder about - not necessary to follow but as a source of new ideas or reminder about old ideas ( I can't remember and use everything I've learned and a times I get bored with a style and looking to try smth new). Most gurus are secretive and keep their methods secret -- this is, I think, for psychological reasons to build up 'elite' mentality between their followers but some of them may really think they do discovered the holly grail trade....

Imo, Aeromir, for most part has a good approach. New ideas are discussed in the open where more in depth explanations, or orders to copy, follow in service. But the idea is presented at the open. Of course this is not 100% but Tom and Dan (and others too) do a good job laying out ideas for public audience.
I don't follow closely what's going on on Aerimir lately but this is how it was where I was more up to date. It is a good place to be. I just wish for bit more critical posts - which may be seen as ingratitude to a presenter (wrongly) but is for benefit of all: gurus and students and posters alike.

Sorry for yet another long post. I be out for a while.

 

[Tb2018]

Marcas, I agree (again) with you 99.999 % and for sure 110% regarding Tom, Aeromir and the great service provided to all of us!
I will advise new traders to study the fundamentals of trading using the free tools available from this site ( https://my.aeromir.com/trading-resources) especially under Exchanges and Government .Also to use more of a forward testing (set a position in a simulated account and see how it evolves, more than using a backtest to validate any strategy.

“Where you are coming from doesn't matter but where you are going does. Hence look forward and not backwards. Your eyes are placed in front of you for a reason. Your eyes only look backwards for special references. Keep your eyes on the road.”
― Oscar Bimpong

Success can be a lonely road. It can be a tough road. It can be a hard road. It’s certainly not for everyone.